The impact of hurricanes on the U.S. economy can be felt in tonight's market

As hurricanes "Heleni" and "Milton" continue to hit the southeastern United States, their negative impact on the economy is gradually becoming apparent, as seen in tonight's initial claims and retail sales data.

Let's first look at last week's data. In the week of October 5th, the number of initial claims for unemployment benefits in the United States surged by 33,000 to 258,000, far exceeding expectations and the previous value, marking the highest number of claims since early August 2023.

Among them, the number of unemployment benefit applications in Florida and North Carolina increased significantly, possibly due to the impact of the first hurricane, "Heleni." States affected by the storms such as Tennessee, Virginia, and Kentucky also saw a sharp increase in claims.

An analysis compared the historical initial claims data before and after excluding the impact of hurricanes. It shows that after Hurricane Katrina landed in 2005, including Louisiana, which was most affected by the hurricane, the number of applications increased by 30% and remained at a high level for the following five weeks, while the number of applications in other regions of the United States during the same period decreased year-on-year.

When Hurricane Sandy hit New York and New Jersey in 2012, it also led to a 30% week-on-week increase in the number of applications, and the number of applications in these two regions remained at a high level for the following four weeks compared to other regions of the United States.

Hurricane Harvey, which affected the Houston area in 2017, led to an increase of about 15% in initial unemployment claims that week. Compared to other regions of the United States, the number of unemployment claims in that area remained at a high level in the following two weeks.

Last week, the national initial claims data increased by 17.5% year-on-year. Excluding Florida and North Carolina, which were most affected by hurricanes, the number of applications increased by 12.5% year-on-year. Further excluding Michigan and Ohio, which may be affected by strike actions, the number of applications increased by 7.1% year-on-year, consistent with the trend from the previous month.

Analysts believe that based on past hurricane impact experiences, it is expected that the growth in the number of applications in North Carolina will decline tonight. However, due to the double impact of hurricanes "Heleni" and "Milton," Florida may see a larger increase in initial claims.

In addition, analysts also predict that hurricanes will affect the October non-farm payroll data released on November 1st, just a few days before the U.S. election on November 5th. Furthermore, the super hurricanes will drive up food and energy prices and may have an impact on the GDP for the third quarterHowever, some analysts also point out that any impact of the storm on the economy will be temporary. Ryan Sweet, Chief US Economist at Oxford Economics, stated:

"The hurricane will cause a slight drag on the economy at the beginning of this quarter, but the output losses will be offset in the coming months."